U-M endowment rebounds to $10.9B with 13.8 percent return

By Rick Fitzgerald
Public Affairs

Topic: Regents

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New investments through the Victors for Michigan fundraising campaign and a strong rate of return on investments pushed the market value of the University of Michigan endowment to $10.9 billion at the end of the 2017 fiscal year. A year ago, the endowment was valued at $9.7 billion.

The return on investment for the university's long-term portfolio, which includes the endowment, was 13.8 percent in the fiscal year that ended June 30.

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With a 20-year annualized return of 9.7 percent, U-M ranks in the top decile for long-term investment performance among university endowments. This performance has helped sustain and grow the U-M endowment in real terms net of spending.

The figures were presented Thursday to the Board of Regents during a meeting on the UM-Flint campus.

The strong investment performance underscores the university's long-term investment strategy, which continues to provide a steady stream of endowment funding for university programs. In FY '17, distributions to the general fund totaled $325 million, up from $304 million last year.

Over the past 20 years, endowment distributions to the general fund, which pays for the core academic mission of the university, have exceeded $4 billion.

The university's endowment is a collection of more than 10,000 separate endowment funds that provide support for specific purposes such as scholarships, educational programs or professorships. For example, roughly $2 billion, or 21 percent of the endowment, is dedicated for use by Michigan Medicine. Another $2 billion is earmarked for student scholarships and fellowships.

Endowment gifts are part of the university's Victors for Michigan fundraising campaign, which reports a record-breaking fundraising total of $476 million in cash gifts and pledge payments made during the fiscal year that ended June 30. As of Aug. 31, donors had given $4.24 billion to the Victors for Michigan campaign, with 15 months remaining.

To ensure continuing support for future generations, endowment funds are invested so part of the annual distribution can provide a steady flow of dollars each year. This long-term approach also is designed to protect and grow the endowment corpus in real terms.

U-M annually distributes 4.5 percent of the endowment's average market value calculated over the last seven years for operating purposes. Basing the spending on a trailing average market value instead of the current market value allows the university to stabilize endowment distributions so operating budgets are insulated from the volatility in financial markets and receive dependable support over time.

The U-M endowment is ranked the ninth largest among all U.S. universities and third — after two university systems — among public universities. On a per-student basis, U-M's endowment is ranked 86th, making it much smaller than many private school peers while supporting a much larger number of students.